Chart of the Day EURJPY
EURJPY Bullish - Probable Price Path
The Fed has essentially put further policy adjustments on hold as it shifts toward monitoring conditions. During this phase, Fed Chair Jerome Powell made clear the limits on further Fed policy actions but noted the FOMC’s preparedness, if not the likelihood, that it will adjust existing programs as needed. Overall, it was rather uneventful as there were no new policy measures, no material change in guidance and no fresh forecast leanings, for now. In essence, the Fed is taking a breather to monitor conditions including the shift toward reopening parts of the economy and the possible future path of the COVID19 virus. Wednesday’s rally on Wall Street was sparked by hopes of a COVID-19 treatment and FOMC Chair Powell’s reassurances that the Fed is in no hurry to pare back its monetary stimulus. The CBOE volatility Index (VIX) or “fear index” eased to 31.23 (from 33.57 previously). US Treasury yields moved in mixed directions on Wednesday as the Fed repeated its vow to use every tool in its toolbox to rescue the economy. The US dollar weakened against the major currencies on Wednesday. The US Dollar index (DXY) slipped lower by 0.3% to 99.565 (from previous close of 99.865), but held above a two-week low of 99.44 reached on Tuesday. The key US data on Thursday will include March PCE and core PCE, personal income and spending, 1Q20 employment cost and more importantly, the US initial jobless claims. Over the past five weeks, US recorded 26.45mn jobless claims, exceeding the 22.442mn jobs created from November 2009 till February 2020. We expect 5mn claims (from the 4.4mn claims reported on 23 April, whilst Bloomberg estimate is at 3.5mn). Attention will also stay on the US corporate earnings calendar with several S&P 500 companies reporting
The European Central Bank (ECB) will announce its monetary policy decision later today. The meeting is likely to be dominated by discussion of possible expansion of the Pandemic Emergency Purchase Programme (PEPP) and an extension of the range of assets eligible for purchase. Under existing facilities, the ECB is buying about EUR 6bn in government debt daily, but more will need to be done to cover sovereign issuance across the Eurozone over the remainder of 2020. Meanwhile, the PEPP was announced on 18 March with a well of up to EUR 750bn to purchase sovereign debt and private assets until end-2020 or “until the COVID-19 crisis phase is over”. JPY continued to strengthen amidst thin liquidity with Japan on holiday on Wednesday. Japanese March retail sales declined - 4.5% m/m, -4.6% y/y, whilst industrial production also fell -3.7% m/m, -5.2% y/y in March. Note that there will be more Japanese month-end data due later this afternoon, including vehicle production, housing starts, construction orders and April consumer confidence index.
From a technical and trading perspective, the EURJPY continues to contract in a descending wedge pattern rotating around the yearly first support pivot and last year's low at 115.50. Bullish exposure should be rewarded on a closing breach of the near term volume weighted average price currently at the 116 level. If confirmed bulls can reasonably target a test of symmetry swing resistance towards 118. 118 will represent a pivotal decision point for the market a clos above here will open the primary symmetry swing target at 120, however if sellers do reemrge at the 118 handle then we are likely going to see a test the primary equality objective at 114.30 before a more sustained recovery can ensue.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!